18.6.12
The Tail That Wags the Dog
Sometimes it's the shape of a lot, more than anything else that can determine the use or the usability of a piece of NYC real estate. The Full Story below brings us just such an example. 246 Fifth Avenue is hitting the auction block in a sale managed by NGKF and Auction.com. A slightly neglected building with a defaulted loan of $14.5M, it now owes around $18.5M with interest and fees. With 32kSF extant and another 24kSF buildable as of right, the full value of the outstanding note works out to a reasonable $320/SF buildable. NGKF states that the property and it's potentially reasonable price could be a "opportunity for residential redevelopment, an office building or boutique hotel".
What isn't mentioned is the properties 'L' shape which relegates just over 10kSF of the existing floor area to a 25' wide "tail" that is interior to the block and tightly hemmed in by the adjacent buildings. Residences and hotels both like windows that open up to more than the brick wall of the next building. Offices that aspire to being more than simple tax payers do as well.
In many cases, a problem can be the root of opportunity. An oddly shaped lot such as 246 Fifth Avenue, would be the perfect seed lot for the start of an assemblage. Slowly purchasing adjacent Fifth Avenue lots that back on to 246s "tail" would eventually lead to a very nice sized corner lot. Unfortunately, sitting in the North Madison Historic District ensures that nothing could ever be done with such an assemblage and therefore this is not one of those opportunities. A landmarked district means no transformative changes to the property, no assemblage redevelopments and limited use of unbuilt FAR. A lack of useful windows on the interior tail severely limits any residential or hotel options and the narrow dimensions of the lot ensures only lower rent offices will take space.
The only thing this property is truly useful for would be transferable development rights- TDRs.
The limitations of the historic district prevent any utility from being gained by a typical transfer to an adjacent lot or to a lot directly across the street. This frees up the FAR to become TDRs and move a bit further afield. Such a move would require the approval of the local CB, the CPC and a ULURP process but it would be easier than trying to squeeze residential units of any value out of the tail of 246 Fifth Ave. A more adventurous play would remove the useless tail completely and roll that SF into TDRs as well.
At Cubed Advisory, we not only help purchasers plot out the potential of new developments, but we also help brokers properly position properties they have for sale. As 246 Fifth Avenue goes to auction, would you rather bid on $18.5M of debt on 22kSF of useful building and have the tail wag the dog to a price of over $800/SF of useful buildable SF? Or would you rather bid on the same debt for the same amount of useful building and a minimum of 24kSF of TDRs possibly up to 34kSF?
We know which sounds better to us.
Full Story
In many cases, a problem can be the root of opportunity. An oddly shaped lot such as 246 Fifth Avenue, would be the perfect seed lot for the start of an assemblage. Slowly purchasing adjacent Fifth Avenue lots that back on to 246s "tail" would eventually lead to a very nice sized corner lot. Unfortunately, sitting in the North Madison Historic District ensures that nothing could ever be done with such an assemblage and therefore this is not one of those opportunities. A landmarked district means no transformative changes to the property, no assemblage redevelopments and limited use of unbuilt FAR. A lack of useful windows on the interior tail severely limits any residential or hotel options and the narrow dimensions of the lot ensures only lower rent offices will take space.
The only thing this property is truly useful for would be transferable development rights- TDRs.
The limitations of the historic district prevent any utility from being gained by a typical transfer to an adjacent lot or to a lot directly across the street. This frees up the FAR to become TDRs and move a bit further afield. Such a move would require the approval of the local CB, the CPC and a ULURP process but it would be easier than trying to squeeze residential units of any value out of the tail of 246 Fifth Ave. A more adventurous play would remove the useless tail completely and roll that SF into TDRs as well.
At Cubed Advisory, we not only help purchasers plot out the potential of new developments, but we also help brokers properly position properties they have for sale. As 246 Fifth Avenue goes to auction, would you rather bid on $18.5M of debt on 22kSF of useful building and have the tail wag the dog to a price of over $800/SF of useful buildable SF? Or would you rather bid on the same debt for the same amount of useful building and a minimum of 24kSF of TDRs possibly up to 34kSF?
We know which sounds better to us.
Full Story
Labels: Auction.com, distressed sales, NGKF, NoMad, TDRs
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